Money Rehab with Nicole Lapin - Elon Musk Did What?!

Episode Date: January 18, 2023

From foreign leaders ghosting Davos to Tesla facing an angry mob, Nicole demystifies the biggest headlines of the week and teaches you how the current news cycle will affect your finances.

Money rehabbers, you get it. When you're trying to have it all, you end up doing a lot of juggling. You have to balance your work, your friends, and everything in between. So when it comes to your finances, the last thing you need is more juggling. That's where Bank of America steps in. With Bank of America, you can manage your banking, borrowing, and even investing all in one place. Their digital tools bring everything together under one roof, giving you a clear view of your finances whenever you need it. Plus, with Bank of America's wealth of expert guidance available at any time, you can feel confident that your

money is working as hard as you do. So why overcomplicate your money? Keep it simple with Bank of America, your one-stop shop for everything you need today and the goals you're working toward tomorrow. To get started, visit bofa.com slash newprosmedia. That's b-o-f-a dot com slash n-e-w pros p-r-o-s media. bfa.com slash newprosmedia. I'm Nicole Lappin, the only financial expert you don't need a dictionary to understand. It's time for some money rehab. All right, let's catch you up with the big stories happening on Wall Street. And as per usual, the biggie is inflation. Last week, CPI numbers came out. These numbers are the government's official measure of inflation.

The new numbers are part, though, of a very slow downward trend. They dropped from 7.1 in November to 6.5 in December. The current drop is due to a decrease in fuel and airline ticket prices. Now, since both of these are factors in shipping costs, they will have a much larger impact on inflation than, let's say, the cost of milk. If you pull out the cost of fuel and food, you get a number called core CPI. That number dropped from 6 percent to 5.7 percent. Again, not the hugest drop in the history of the world. Inflation is still growing, but just at a slower rate. In a speech last week, the current head of the Federal Reserve Bank of Philadelphia said he thought we were seeing a pivot from concerns over inflation in the goods sector

to inflation in the service sector. So again, we're seeing the Fed wrestling with wages as a factor in inflation. We talked about that on the pod last week. We'll link that bad boy in the show notes below if you want to catch up. And there's a little more good news about inflation. This week, the World Economic Forum meets in Davos. Now, Davos, I had to say it that way. Davos is a bunch of mostly rich, white, predominantly male bankers and world leaders meeting in Switzerland to try and save the world. Seriously, it's about as tone deaf as it sounds. This year, the theme is cooperation in a fragmented world. This topic may be a little more on the nose than they had planned because traditionally, the sitting U.S. president and other world leaders attended. But those names are noticeably absent

this year. Biden isn't going and neither is the president of China, Xi Jinping, also skipping the affair, the UK prime minister, the prime minister of India, and the president of France. I don't know why I keep saying it this way, but it feels right. These are some heavy hitters that would have gone in the past. I guess the big question is, has Davos lost its charm or has globalization so fallen out of favor that world leaders don't want to be seen attending a booster rally for it? However, I will say that what gets said there still carries a lot of weight. And early reports suggest a more optimistic outlook for the global economy than what we've been hearing in recent months. the global economy than what we've been hearing in recent months. Most speakers are speculating that China relaxing its COVID policy will actually help ease those supply chain shortages that have been driving up prices for the last few years. Other economists like at Barclays and Barenberg have also raised some of their growth predictions. They've been projecting a possibility of a softer

recession than some of the past numbers we've been looking at. And in other news that involves a rich white guy who claims to have our best interests at heart and is a fascinating dude to report on. Can you guess who I'm talking about? On Thursday, Tesla cut its prices of its lineup of cars. This move is complicated. If you're looking to buy a Tesla, this is great news. Not only is the price cheaper, but the lower price means that cars are eligible for more tax credits. Between the slashed price and the tax credit, the price of some vehicles has been lowered by as much as 30%. But if you just bought a Tesla, this move has got a sting.

Tesla also slashed prices in the Chinese market, and owners there were so outraged that they actually staged a small protest over it. This is a move, though, that might help Tesla stay competitive in the electric vehicle market. When Elon Musk first launched the company, he was a pioneer. That's no longer the case, as EVs have become more mainstream. But while the EV market has evolved so much, Tesla's car lineup really hasn't. Cheaper prices might help them stay competitive in a more crowded field. Last Friday, after a drop at the open, Tesla's stock price actually closed close to the previous

day's price. This week will determine if investors believe these price cuts will stimulate sales enough to make up the loss in revenue or if Tesla's stock price will continue its long, slow slide from its peak back in November of 2021. The U.S. government also finds itself facing uncertainty this week. Last week, Treasury Secretary Janet Yellen announced that the U.S. could hit its credit limit as early as this Thursday. Now, Yellen and the Treasury have a little wiggle room here to move money around and keep this from happening. The U.S. hit the debt ceiling in 2011, and our national credit score still hasn't recovered. Not only that, but the

markets fell on the news and it took months to recover. So this deadline is something that markets will be watching very closely. We can also look forward to some housing numbers this week. We get the Home Builders Index. We also get building permits and housing starts. And on Friday, we got existing home sales. These numbers have not been great if you're looking to buy a home. While interest rates have been hammering prospective buyers, there just aren't enough homes on the market to meet the demand, leading to a situation where housing prices, especially in high-demand areas, have stayed high despite the mortgage rates. Usually, housing prices and interest rates work as a seesaw.

When interest rates go up, home prices are supposed to go down. But interest rates are up and home prices are up in a lot of areas. So that is not a seesaw. It's not the financial fun and games home buyers are used to. Here's a quick tip you can take straight to the bank.

While I hope you never have to decide to pay your car note or your mortgage first, you should make an educated decision about which debt you should focus on paying off first. I've had this conversation many times lately in my DM slips and honestly with a lot of friends out there trying to decide what to invest in and what to pay off. A fancy phrase for it is rate arbitrage, but all that means is really comparing your interest rates. If you have different kinds of interest rate debt, you want to pay the highest interest rate off first. If you're looking between investments and debt, you just want to compare the interest rate. So if you're looking at an investment that will get you 5% but you have debt that's accruing interest at 7%, you should pay off the debt first.

On the flip side, if you have an investment that will yield you 7%, but debt that is accruing at 5%, the 7% is the way to go. It's really just a rate game, and the rules to play and win are quite easy. Compare, contrast, rinse, repeat. You're welcome. Money Rehab is a production of Money News Network. I'm your host, Nicole Lappin. Our executive producer is Morgan Lavoie. Do you need some money rehab? And let's be honest, we all do. So email us your money questions at moneyrehab at moneynewsnetwork.com to have your question answered on the show or even

have a one-on-one intervention with me. And follow us on Instagram at Money News and TikTok at Money News Network for exclusive video content. And lastly, thank you. Seriously, thank you for listening and investing in yourself, which is the most important investment you can make. Thank you.